In Business, Ethics is Everyone’s Business

What happened to companies like Enron, WorldCom, Tyco, or even organizations like the Catholic Church where ethics collapsed and management behavior became criminal? Their leaders did not set out to break the law. So how did they end up disgraced, and some even behind bars?

Many of these problems can be traced to a failure of ethical decision-making. Ethics acts as a “fail-safe” mechanism.

People can start out with good intentions and correct principles and then incrementally twist them to suit their own interests. This is especially true in larger companies where it is easier to distance oneself from the “faceless” corporation. That’s why people who otherwise abide by high ethical standards chose to act contrary to those beliefs and leads to disastrous consequences for their organizations.

Most business executives want to run ethical companies. They believe the culture of their organization is expressed through their policies and employee handbooks. But it doesn’t really work that way. Instead, the culture of a company is defined by the conduct of its managers, officers, and executives. Employees pay much closer attention to what leaders do than what they say — and they emulate the behavior that leaders display.

In business, ethics is everyone’s business. If employees see executives and managers acting in an unethical manner, they feel justified behaving the same way. If management treats other employees, customers, or vendors poorly, don’t expect the employees to behave any differently.

Comments

I think the lack of ethics has an even more fundamental source than the ones mentioned, it is a failure of the corporate environment to recognize and reward humanity. Even in small businesses the phrase “Whatever it takes” is used alot espeically in the sales forces. Money and power define everything that is important.

But I like one aspect of the treatment in the article very much–hierarchy matters. The culture of a group, organization or business is determined by the actions and attitudes of the leaders. Character defines competence. In business, it is impossible for rank and file workers to get change in leadership, but in voluntary associations it is not only possible, but becomes the responsibility of everyone to demand leadership that reflects the highest standards of accountability and character. Where leaders are unwilling or unable to meet the standards expected and required, they should be replaced.

I think the lack of ethics has an even more fundamental source than the ones mentioned, it is a failure of the corporate environment to recognize and reward humanity.

That’s true. The expression “it’s not personal, it’s just business” is one of those misguided ideas adopted by many business leaders, especially Trump, which promotes an incorrect approach to business and gives fuel to the anti-capitalist critics. In fact, some of the best minds in business, including the father of the concept known as “business management”, the late Peter Drucker, said the exact opposite. Employees are a company’s most valuable asset and must be treated as such. I plan on tackling this issue more thoroughly in a future article.

A paycheck is a very powerful motivator, especially for individuals without a financial cushion. It’s easy to be ethical when you have a roof over your head and your savings account can sustain you for a few months. But it becomes much harder to stand up to unethical management practices when you live paycheck to paycheck.

Having worked at many companies I have seen this first hand. Many decent and ethical folks comply for fear of losing it all. Bosses without guts and ethical makeups were allowed complete control over their departments and terrorized those they managed. Higherups did not care as long as appearances were not disturbed and managers met deadlines. These departments were awful to work in and the company, the employees and the customers suffered. Just awful.